PBOC continues attempts to calm markets

Top StoriesPBOC continues attempts to calm markets. Chinese markets were calmer today as inter-bank market rates dropped further, although shares fell 0.4%,
after the People's Bank of China said that it has provided liquidity to
banks and that it will inject cash "based on the market's actual
situation." The PBOC also said it will maintain its "prudent monetary
policy," suggesting continued tightening. The comments reflect a further
attempt by the PBOC to ease the credit crunch it engineered last week
as a strategy to slow China's lending boom.

Spot gold prices drop to three-year low. Spot gold prices have dropped to their lowest since August 2010, down 4.2%
at the time of writing to $1,224.30 an ounce, as better-than-expected
economic data in the U.S. yesterday strengthened the likelihood that the
Fed will soon start tapering its QE program. Gold has fallen around 25%
this year and assets in the SPDR Gold Trust ETF (GLD) are 28% lower, hitting 969.5 metric tons yesterday. Silver (SLV) has been similarly battered, with spot prices -5.4% at $18.58 an ounce.

Australian PM ousted.
Australian Prime Minister Julia Gillard has lost a Labor Party
leadership election to Kevin Rudd, who Gillard ousted three years ago in
similar circumstances. Labor is heavily behind in the polls to the
opposition Liberals ahead of a national poll that has been scheduled for
September. The Australian dollar (FXA) jumped following Rudd's win and was +0.55% at $0.9306 at the time of writing.

Top Stock NewsRising bond yields hurt bank balance sheets.
Falling bond prices and rising yields are threatening the recovery in
the balance sheets of global banks, which have built up huge portfolios
of liquid securities. For example, 90% of Bank of America's (BAC)
$315B portfolio comprises mortgage bonds and Treasurys. Some analysts,
though, believe that QE tapering should increase interest margins and
offset the one-time hit to book values because of rising bond yields.

Rio mulls sale of Mozambique coal unit. Having this week given up in its attempt to sell its diamond business, Rio Tinto (RIO)
is now considering divesting all or part of its coal unit in
Mozambique, which could fetch over $700M after being written down by $3B
in January. The deliberations represent a change of thinking for Rio,
with the company previously saying the project wasn't for sale.

Roche, AstraZeneca to combine drug data to boost research. Roche (RHHBF.PK) and AstraZeneca (AZN)
are becoming the latest pharmaceuticals companies to pool their
resources to improve R&D, with the pair agreeing to share limited
data on early-stage drug designs via a third firm called MedChemica. The
latter analyzes chemical compounds to identify structures that tend to
lead to problems with safety or efficacy.

Top Economic & Other NewsCanada plays down Keystone pollution fears. TransCanda's (TRP)
Keystone XL pipeline shouldn't cause a net rise in carbon emissions,
Natural Resources Minister Joe Oliver said yesterday, responding to
President Obama's statement that the U.S. should approve the project
only if it would not increase carbon pollution. Oliver said at least 20%
of Keystone oil would be lighter crude that would not come from tar
sands, and thus not carbon intensive to produce.

EU to try again over rules for bank rescues.
EU finance ministers are due to make a second attempt this evening to
decide on the regulations for coping with bank failures. Talks last
weekend were unsuccessful following division over how much leeway
governments should have. Germany is pushing for an EU standard in which
losses would be imposed on shareholders, bondholders and deposits of
over €100,000. France, Britain, Denmark and Sweden want flexibility in
whether to take such steps.

Energy industry major target of cyber-attacks.
More cyber-attacks hit the oil and gas sector from April to September
2012 than any other industry, a report from the U.S. Council on Foreign
Relations (CFR) says. Assaults take two main forms: one is cyber
espionage, with Chinese hackers, for example, stealing gigabytes of
material such as bidding information on lease auctions in a campaign
that ran from 2008-2011. The other form is disruption to critical
businesses and physical operations.

German consumer confidence hits six-year high.
The Gfk survey of German consumer confidence has climbed to its highest
level in close to six years, rising to 6.8 going into July from 6.5 for
June and beating consensus, which was also 6.5. Sentiment has been
boosted by a strong labor market and big wage hikes. It's positive news
for those looking to domestic demand to support growth in Germany and
the wider eurozone.

Italy faces losses from deficit fudging prior to euro entry.
Italy may have made substantial losses on derivatives contracts it
restructured at the height of the eurozone crisis in H1 2012. Experts
who viewed a confidential government report believe the contracts
originate from when Italy was preparing to enter the euro in the late
1990s and calculate the losses at €8B. The suspicion is that the
Treasury, whose Director-General was Mario Draghi, used the instruments
to bring the government's budget deficit to below the 3% eurozone
requirement.

Chinese data suffers from conflict of interests.
A major problem with the collection of economic statistics in China,
says Caixin Online, is that the career prospects of local officials are
closely tied to their regions' economic performance, thereby providing a
strong motivation to falsify the data. One solution would be to ensure
that "statistics bureaus can work independently" and so "minimize the
intervention of local officials."